Spider-Man Faces an Enemy More Persistent than the Green Goblin– Litigation!

On Monday, January 26, 2009, the shareholders of Stan Lee Media, Inc. (“the Company”) filed suit against Marvel Comics, Inc., and the Company’s founder and namesake, Stan Lee, the celebrated co-creator of many famous Marvel Comic’s characters, including Spider-Man, X-Men, Iron Man, the Hulk, the Fantastic Four, and Daredevil. The suit, filed in the U.S. District Court for the Southern District of New York, alleges that profits earned by Lee for his creations rightfully belong to the Company and requests $750 million in damages. Although the suit names only four shareholders as plaintiffs, the plaintiffs claim that they are seeking damages on behalf of all of the Company’s shareholders.

Monday’s suit is only the latest case in a long line of litigation involving Stan Lee, Stan Lee Media, Inc., and Marvel Comics. In August 1998, Marvel terminated Lee’s long-time employment, which apparently voided Marvel’s exclusive claim to the intellectual property Lee created while employed by Marvel. Lee then formed his own company with friend Peter Paul, Stan Lee Media, Inc., in order to use his creations in online and digital projects. The company filed for bankruptcy protection in 2000 and in 2002, Lee sued Marvel over his co-authorship rights and was awarded approximately $10 million in damages. The Company eventually emerged from bankruptcy in 2006; however, in the meantime, Lee left Stan Lee Media, Inc. and regained employment with Marvel Comics. On December 6, 2006, Stan Lee Media, Inc. instituted a $5 billion lawsuit against Marvel Comics, claiming that Lee had retained his co-creator rights to the Marvel characters he created, had contractually assigned those rights to Stan Lee Media, and thus, the Company was due half of the earnings derived from those creations. The outcome of that suit is still pending.

In the newest lawsuit, Stan Lee Media, Inc.’s shareholders claim that part or all of the proceeds being paid to Stan Lee under his current employment contract with Marvel should also be awarded to the Company. Lee argues that he did not actually own the copyright to his creations but that they were merely works-for-hire owned by Marvel, and thus, he could not have assigned the rights to Stan Lee Media while he worked there. However, Stan Lee Media has a strong argument that it rightfully possesses Lee’s co-authorship rights in certain Marvel creations, because Lee was successfully able to prove in the 2002 lawsuit that he did retain his co-authorship rights after leaving Marvel in 1998. The factual question remains to be determined as to whether Lee assigned those rights through his employment contract with Stan Lee Media, or whether he personally maintained his co-authorship rights throughout his employment with Stan Lee Media. Ultimately, all this litigation over copyright ownership could have an effect on future Marvel projects and creations, and could eventually lead to Watchmen-type litigation in which individual projects are held up as their ownership is conclusively established.